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The coefficient of price elasticity of demand is always
- a)Zero
- b)Undefined
- c)Positive
- d)Negative
Correct answer is option 'D'. Can you explain this answer?
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Verified Answer
The coefficient of price elasticity of demand is alwaysa)Zerob)Undefin...
This ratio is often called the elasticity c
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The coefficient of price elasticity of demand is alwaysa)Zerob)Undefin...
Explanation:
The coefficient of price elasticity of demand is a measure of the responsiveness of the quantity demanded of a good or service to changes in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
The coefficient of price elasticity of demand can take on different values depending on the degree of responsiveness of quantity demanded to price changes. However, it is always negative because of the inverse relationship between price and quantity demanded.
Here are some possible values of the coefficient of price elasticity of demand and what they indicate:
- Elastic demand (|PED| > 1): A small percentage change in price leads to a relatively larger percentage change in quantity demanded. Consumers are very responsive to price changes, and the total revenue of the seller decreases when the price is increased.
- Inelastic demand (|PED| < 1):="" a="" large="" percentage="" change="" in="" price="" leads="" to="" a="" relatively="" small="" percentage="" change="" in="" quantity="" demanded.="" consumers="" are="" not="" very="" responsive="" to="" price="" changes,="" and="" the="" total="" revenue="" of="" the="" seller="" increases="" when="" the="" price="" is="" />
- Unit elastic demand (|PED| = 1): A percentage change in price leads to an equal percentage change in quantity demanded. The total revenue of the seller remains constant when the price is changed.
Conclusion:
In conclusion, the coefficient of price elasticity of demand is always negative because of the inverse relationship between price and quantity demanded. The value of this coefficient can vary depending on the degree of responsiveness of quantity demanded to price changes.
The coefficient of price elasticity of demand is a measure of the responsiveness of the quantity demanded of a good or service to changes in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
The coefficient of price elasticity of demand can take on different values depending on the degree of responsiveness of quantity demanded to price changes. However, it is always negative because of the inverse relationship between price and quantity demanded.
Here are some possible values of the coefficient of price elasticity of demand and what they indicate:
- Elastic demand (|PED| > 1): A small percentage change in price leads to a relatively larger percentage change in quantity demanded. Consumers are very responsive to price changes, and the total revenue of the seller decreases when the price is increased.
- Inelastic demand (|PED| < 1):="" a="" large="" percentage="" change="" in="" price="" leads="" to="" a="" relatively="" small="" percentage="" change="" in="" quantity="" demanded.="" consumers="" are="" not="" very="" responsive="" to="" price="" changes,="" and="" the="" total="" revenue="" of="" the="" seller="" increases="" when="" the="" price="" is="" />
- Unit elastic demand (|PED| = 1): A percentage change in price leads to an equal percentage change in quantity demanded. The total revenue of the seller remains constant when the price is changed.
Conclusion:
In conclusion, the coefficient of price elasticity of demand is always negative because of the inverse relationship between price and quantity demanded. The value of this coefficient can vary depending on the degree of responsiveness of quantity demanded to price changes.
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The coefficient of price elasticity of demand is alwaysa)Zerob)Undefin...
Answer is D because of inverse relationship between percentage change in demand and percentage change in price
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